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Get Four
|  | JANUARY 21, 2005
 PAUL CHERNEY By Paul Cherney Where Are the Buyers? Based on current measures, the chances for a panicked period of selling have increased The markets are "searching for buyers," and the buyers want better bargains than they have seen already. Longer-term measures of accumulation versus distribution remain at levels suggesting that the markets are still in a distribution mode and until that changes, lifts in price are usually only short-term phenomenon. This is exactly the opposite of the technical condition that was in place for November and December of 2004, when I would include words to the effect: "declines in price are usually short in duration and shallow in depth." There simply has not been enough technical evidence of aggressive buying to tilt the scales to favor of a sustained trend higher. There is a negative bias in place as long as the CBOE volatility index, or VXO, remains above 14.19. The chances for a panicked period of selling have increased. If the VXO jumps above 14.96, that might coincide with aggressive, capitulation style selling (short-term). But, the index would have to reverse and head lower to suggest that short-term selling pressures might be giving way to a short-covering rally of a day or two. We have not seen truly panicked selling yet, just persistent and orderly distribution. In my opinion, the Nasdaq is in an area of critical support: 2050-2025. A close under 2025 would create an extremely oversold condition that should produce a bounce, but, if the short-covering rally that follows cannot turn the tide and attract follow-through buying, a second move under 2025 would open immediate downside risk for Nasdaq prints at the next layer of support which is 1,981-1,900. The S&P 500 is at a thin line of support that technically exists at 1,169-1,160.52. It would not be healthy for bulls to see a close under 1,160, because in my view of the chart that would increase downside risk for a test of the next layer of support under 1,160.52 which is 1,142.05-1,090.19. S&P 500 immediate resistance is 1,174-1,182.52, then 1,185-1,195.98, then 1,205-1,209.53. There is more formidable resistance from July, 2001. The older the resistance, the less precise you can be, but here is the read from the 60-minute charts from July and August of 2001: resistance is 1,215-1,226.27. Nasdaq resistances are 2,045-2,065, stacked at 2,072-2,116, with a well-defined ledge of resistance at 2,086-2,103. Next resistances are 2,132-2,152, with a stacked shelf at 2,155-2,165. Anytime resistance is exceeded it must be treated as support until broken. Anytime supports are broken they must be treated as resistance until exceeded.  Cherney is chief market analyst for Standard & Poor's All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.
BW MALL
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